Correlation Between Aurora Mobile and DigitalOcean Holdings

Can any of the company-specific risk be diversified away by investing in both Aurora Mobile and DigitalOcean Holdings at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Aurora Mobile and DigitalOcean Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aurora Mobile and DigitalOcean Holdings, you can compare the effects of market volatilities on Aurora Mobile and DigitalOcean Holdings and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Aurora Mobile with a short position of DigitalOcean Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aurora Mobile and DigitalOcean Holdings.

Diversification Opportunities for Aurora Mobile and DigitalOcean Holdings

0.2

Correlation Coefficient

Aurora Mobile  DigitalOcean Holdings

Modest diversification

The 3 months correlation between Aurora and DigitalOcean is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Mobile and DigitalOcean Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DigitalOcean Holdings and Aurora Mobile is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Aurora Mobile are associated (or correlated) with DigitalOcean Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DigitalOcean Holdings has no effect on the direction of Aurora Mobile i.e., Aurora Mobile and DigitalOcean Holdings go up and down completely randomly.

Pair Corralation between Aurora Mobile and DigitalOcean Holdings

Allowing for the 90-day total investment horizon Aurora Mobile is expected to under-perform the DigitalOcean Holdings. In addition to that, Aurora Mobile is 2.25 times more volatile than DigitalOcean Holdings. It trades about -0.14 of its total potential returns per unit of risk. DigitalOcean Holdings is currently generating about -0.15 per unit of volatility. If you would invest  3,788  in DigitalOcean Holdings on September 28, 2024 and sell it today you would lose (310.00) from holding DigitalOcean Holdings or give up 8.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Aurora Mobile  vs.  DigitalOcean Holdings

Aurora Mobile

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aurora Mobile are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, Aurora Mobile reported solid returns over the last few months and may actually be approaching a breakup point.

DigitalOcean Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DigitalOcean Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Aurora Mobile and DigitalOcean Holdings

The main advantage of trading using opposite Aurora Mobile and DigitalOcean Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aurora Mobile position performs unexpectedly, DigitalOcean Holdings can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in DigitalOcean Holdings will offset losses from the drop in DigitalOcean Holdings' long position.

The idea behind Aurora Mobile and DigitalOcean Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Bonds Directory module to find actively traded corporate debentures issued by US companies.